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Tuesday, September 23, 2014

Approximately 38,000 Washington consumers affected

In the first enforcement action of its kind, Attorney General Bob Ferguson is suing a Philadelphia-based online company for violations of the federal Restore Online Shopper’s Confidence Act (ROSCA) and the state’s Consumer Protection Act.

The Attorney General’s action was filed Monday in the United States District Court for the Western District of Washington against Internet Order LLC and its CEO, Daniel Roitman, doing business as Stroll. The company is accused of using deceptive marketing tactics to lure millions of customers nationwide, including more than 38,000 in Washington.

The company markets and sells foreign language audio courses online, mostly via the website www. pimsleurapproach .com. The courses are widely marketed under the brand name Pimsleur Approach with advertisements featuring their basic language program. The website and marketing promote the “Quick and Simple Course” with a low price “introductory offer” on a set of self-instruction CDs for “only $9.95.”

According to the lawsuit, consumers who purchased the introductory set for $9.95 were unknowingly and automatically enrolled in a “negative option” purchase plan, which obligated them to receive up to four advanced-level additional courses at a cost of $256 each.

In order to avoid charges, consumers were required to ship the advanced-level courses back to the company at their own expense within 30 days. If they failed to do so, they would be automatically charged $256 on the card they used to purchase the introductory “Quick and Simple Course.” The consumers’ total obligation under the negative option “Rapid Fluency Program” could amount to as much as $1,024.

“The company hid the terms of the negative option program in its advertising, and misled consumers into thinking they’d only ordered the inexpensive introductory course for $9.95,” said Ferguson. “Consumers were shocked to find significant charges appearing on their credit card statements for products they hadn’t ordered, and then angered when the company refused to cancel those charges.”

Although each program included a “100% money back guarantee” and a “risk free” 30-day trial, Ferguson alleges the company’s unfair policies made it unreasonably difficult for customers to cancel their enrollments or return items they hadn’t ordered.

Consumers were required to obtain special authorization from the company before they could ship back unordered products, were charged $64 “restocking” fees in some instances, and were subjected to high pressure sales tactics even after stating that they hadn’t ordered anything beyond the introductory course.

“To make matters worse, consumers who refused to pay were hounded with dunning letters and threatened with collection agency action,” Ferguson said.

The company is accused of:

failing to clearly disclose the terms of its negative option sales program;

failing to obtain agreement from consumers to sign up for the program;

failing to provide simple mechanisms to cancel the program as required by law;

making misrepresentations in the context of its advertising; and

using unfair methods in its collection practices.

Washington is the first state to bring an action under ROSCA, which went into effect in December 2010. Senior Counsel Paula Selis is leading the case for Washington. The Pennsylvania Attorney General has also filed a lawsuit against the same company for violations of its state consumer protection laws.